Mortgage help money still trickling to Calif. homeowners

Shaun Futrell of Garden Valley says he was surprised that his application to Keep Your Home California was rejected.

GARDEN VALLEY, Calif. (KCRA) -

Nearly two years after the federal government gave California nearly $2 billion to stop foreclosures, a recent report showed only 8.4 percent of the money has so far gone to homeowners.

In February 2011, California became one of the first states to receive money through the U.S. Treasury's Hardest Hit Fund.

Eventually, 17 other states plus the District of Columbia -- all with high unemployment rates and high foreclosure rates -- received a total of $7.6 billion.

The California Housing Finance Agency used its $1.98 billion share to establish a program known as Keep Your Home California.

"I thought that once we announced this program, every single person that had a mortgage was going to be giving us a call. And it hasn't been that easy. We've had to really work a little bit to make the phones ring," CalHFA director Di Richardson told KCRA 3.

A recent report filed with the federal government showed Keep Your Home California has spent $166 million to help 16,872 homeowners.

The program spent an additional $39 million on administrative support, outreach and counseling.

Out of the 45,365 homeowners who have applied to Keep Your Home California, 37 percent received assistance through one of four available programs.

More than 51 percent of applications were rejected or withdrawn before the process was complete.

"They sure led us to believe that this was an obtained deal. And it certainly did not work out that way," said Shaun Futrell, a homeowner in the El Dorado County community of Garden Valley.

Futrell said after his wife became ill and no longer able to work, the couple fell $59,000 behind in their mortgage payments.

He said he applied in August and was rejected.

"I just felt let down. I don't understand what the program is out there for," Futrell told KCRA 3.

Advocates for homeowners said one of the common reasons for rejection a requirement that mortgage lenders -- also known as servicers -- agree to reduce the loan principle by the same amount as the program offered in assistance, up to $50,000.

"The servicers have been unwilling to participate in a significant way," said Paul Leonard of the Center for Responsible Lending's California office.

However, earlier this year, California became the first state to drop the principle reduction requirement.

Keep Your Home California has begun offering up to $100,000 in mortgage assistance without requiring lenders sacrifice a single cent.

"When we eliminated the match requirement, one of the things that we were able to open up is now we could make these funds available to homeowners that have loans that are owned by Fannie or Freddie. That was huge," said Richardson.

Advocates initially resisted the change, because they saw it as a concession to the mortgage lending industry.

However, some now see it as a necessary compromise.

"I'm hoping that waiving the matching requirement -- though I'm reluctant to support (the change) -- will ultimately allow more borrowers to receive assistance," said Leonard.

In a report filed last month, Keep Your Home California reported it had approved 6,371 applications during the months of July, August and September -- a 67 percent increase over the previous quarter.

However, application approvals and funds disbursement will have to increase even more in order for Keep Your Home California to spend all of its allotment by the end of 2017.

The federal government has said any funds not spent by that time must be returned by the states.

"It's not going to happen. It's not going to happen. I'm confident it's not going to happen," insists Richardson.

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